My wife and I currently own a town home in a small college town in Idaho that we bought in 2021. We have a couple hundred thousand saved and want to invest as we have been watching all of our friends make out like banshees with rental real estate over the past couple years while we have shot ourselves in the foot by waiting for the "perfect deal".

We have a couple options:
Option #1) House hack, buy another townhome or larger property such as a 4-plex here in Idaho for 5% down (not sure if you can buy multi units for 5% down while living in it) while I'm here finishing my last 2 semesters of college and rent our other place out. Would need to do this relatively quickly as we are planning on moving back to Arizona once I am done with school next summer.
Pros: We would be able to take advantage of the lower downpayment by living in it. Second, Idaho has had great appreciation and with the college and other growth I personally feel like it will be a great place to own property in the future.
Cons: All deals I have seen here are negative cash flow with a low down payment... like -15% to -30% cash on cash return. Rents are still low despite the appreciation in home values. (Eg $650k 4-plex rents for $4400 total at market rent, high interest rates, and after expenses I would have to come out of pocket about ≈$17k/yr if I did 5% down and lived in it. Same thing for single unit properties.) Second, the high appreciation Idaho has seen over the past year or two may lead to a harder fall? Not sure, but home prices seem to be falling slightly here. Third, moving out and renting our townhome out wouldn't cash flow much at all.
If you think this option is the best one, how negative would you be willing to go for a deal? -5%? -15%?

Option #2) Live in the home we have now and put our money towards out of state properties that can cashflow.
Pros: It actually cash flows. Friends have been finding deals around 15% C on C return.
Cons: Its out of state with no connections. Second, I have to come out of pocket more with a higher downpayment by not living in it and can't leverage as much.

Option #3) Do both

Option #4) Save our money and wait for deals that can cash flow in Idaho as the market settles.

Maybe this is a stupid question but friends with large portfolios have advised to do option #1 (which seems a little silly tbh), but I have also been advised to do option #2 from other friends that also have large potfolios and seem to know what they are doing causing me to be confused. They all have reaped the rewards of idaho's appreciation which influences their advice as to why option #1 makes sense to them. Despite them owning hundreds of units, they have only been through bullish markets so I would like to get some more advice from the BP community. Thanks all.

Idaho Falls, Idaho

3 Votes